First-run broadcast content has long been the holy grail in the streaming wars; now, it's coming to New York residents via a new company called Aereo. The Web-based service will be available on platforms like Roku and Apple TV and has among its backers FirstMark Capital, High Line Venture Partners and, most notably, Barry Diller's IAC. Diller himself has joined the company's board of directors.
The venture doesn't just pave the way for New Yorkers to cancel their cable subscriptions (Time Warner Cable's cheapest package runs consumers $42 a month, or about twice what a subscription to Netflix streaming and Aereo would cost), but it also sets the stage for an even fiercer war over retransmission fees, especially if Aereo is successful.
The New York Times' Brian Stelter explains how it works: The company doesn't pay license fees to anybody; instead, it sets up thousands of antennas somewhere in New York (it doesn't say where), pulling down digital signals and sending them to its subscribers. As long as it keeps the customer-to-antenna ratio at 1:1 (and the antennas are apparently "roughly the size of a thumb"), the company can argue that it is simply an antenna rental service in the same way that Cablevision's boxless DVR is legally a DVR rental service (hat tip to Stelter, again). It's an ingenious argument, and one that has clearly gotten a lot of vetting as the company trains for the inevitable legal scrap over whether renting antennas is different from pirating a signal.
“Aereo is the first potentially transformative technology that has the chance to give people access to broadcast television delivered over the Internet to any device, large or small, they desire," said Diller in a statement issued Tuesday morning. "No wires, no new boxes or remotes, portable everywhere there’s an Internet connection in the world."
The service will go live on March 14. It costs $12 a month after a 30-day trial and provides access to ABC, NBC, CBS, FOX, The CW and PBS. It's the first time consumers have been asked outright to pay for broadcastTV since the changeover to a digital signal rendered antennas mostly useless in New York. Even digital receivers can't pick up a signal in apartments that once received local broadcasts loud and clear; since that time, cable operators have been at war with broadcast networks looking to shore up their bottom lines by increasing fees to retransmit signals that used to be available for free. The fees used to be nominal; they're getting less so with every new carriage deal.
With the new deal, Aereo gives its subscribers access to something they've never had online before: regular local sports. If you wanted to watch any Giants game except the Super Bowl, you had to watch it on TV (and if you lived in an apartment building, you probably had to watch it retransmitted on cable).
Broadcasters, who would not get a dime from Aereo under its current business model, haven't yet mounted a legal challenge. But that doesn't mean one isn't coming.
"While it sounds like it has some capital behind it, they will need a lot more to fend off litigation if they can't work out separate deals with the networks," said Scott Flick, a broadcast attorney with Pillsbury Winthrop Shaw Pittman in D.C. "It will also be very important as to exactly how they 'process' the broadcast programming on its way to the consumer. After all, any one with a DVR and a set of rabbit ears could collect their own broadcast programming for free. That being the case, the monthly charge makes it look less like an equipment rental service, and more like a retransmission service, particularly given the stated intent to relay the content to phones and other screen devices that are not designed for reception of broadcast signals."
If Aereo succeeds, it will change the business profoundly, and it won't be good for cable operators. First, it will provide compelling evidence that the major broadcasters are worth at least $2.40 a subscription, and it will attack cable companies' subscription bases.